The action follows an onsite inspection of IndusInd Bank’s corporate agency operations conducted from 19 June 2023 to 22 June 2023. The inspection identified several violations of provisions of the Insurance Act, 1938, and of regulations, guidelines, and circulars issued by IRDAI. Following the inspection, IRDAI issued a show-cause notice (SCN) on 26 March 2025.
The most serious violation related to Regulation 20(1) of the IRDAI (Registration of Corporate Agents) Regulations, 2015. The inspection found that IndusInd Bank lacked a dedicated grievance redressal mechanism for its insurance policyholders. Its website displayed a grievance redressal policy primarily meant for banking customers and did not provide an appropriate insurance-specific mechanism or information for policyholders.
The Bank argued that its overall grievance redressal mechanism covered all products, including insurance. It said insurance-related complaints were captured in its customer relationship management (CRM) system and monitored for resolution within specified turnaround times. It also submitted that its toll-free IVR system could handle insurance complaints and that changes had been made to strengthen the grievance mechanism following the inspection.
IRDAI, however, rejected this explanation. It said a general banking grievance mechanism could not substitute for a policyholder-facing, insurance-specific channel through which an insurance customer could lodge a complaint and understand the applicable escalation and reporting framework.
According to the regulator, an internal CRM system and a generic customer-service escalation process did not satisfy the requirement under Regulation 20(1). IRDAI emphasised that a Corporate Agent has a distinct and non-delegable obligation to service and protect the interests of insurance policyholders.
IRDAI took particular exception to the Bank’s representations during and after the personal hearing. IndusInd Bank had represented that its grievance redressal mechanism would be simplified and made accessible through its website. It subsequently furnished screenshots to demonstrate the revised mechanism.
However, when IRDAI conducted a test complaint through the portal, there was no acknowledgement of whether a reference number, SMS, or email was generated or communicated to the complainant.
The regulator said this established that the mechanism represented as functional and compliant was not actually functional when the representation was made. IRDAI treated this as an aggravating factor of a serious nature, stating that representations made by a regulated entity to its regulator carry a heightened duty of truthful and authentic disclosure.
IRDAI concluded that IndusInd Bank had failed to put in place and implement an appropriate grievance redressal mechanism and reporting framework for insurance policyholders. It consequently imposed a ₹1 crore penalty, noting that the default was still continuing. The bank has also been directed to strengthen its grievance mechanism so that an acknowledgment number is generated and issued immediately for every complaint lodged by a policyholder.
IRDAI also found deficiencies in the manner in which insurance renewal notices were issued. The Bank was sending renewal intimations via SMS, but the messages primarily served as payment reminders for the renewal premium and did not include all the disclosures required under the post-sale code of conduct.
The regulator noted that the SMS did not adequately warn policyholders about their duty to disclose changes affecting the policy since inception or the last renewal. It also did not advise customers to retain records, including correspondence and information supplied to the insurer for renewal. IRDAI cautioned the bank and advised it to ensure continued compliance with the applicable regulations and circulars.
Another observation concerned the Bank’s disclosures to IRDAI. Under Regulation 22(3) of the Corporate Agents Regulations, a corporate agent is required to disclose proceedings initiated against it by other regulatory or government bodies within the prescribed timeline.
During the inspection, IndusInd Bank disclosed penalties and actions involving Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and directorate of enforcement (ED). These included RBI penalties of ₹1 crore each in two matters, a SEBI penalty of ₹1 crore and an ED penalty of ₹50 lakh, among other actions.
IRDAI found that these penalties had not been disclosed to it within the required timeframe. The Bank said it had presumed that only insurance-related proceedings needed to be reported and attributed the lapse to an unintentional delay. IRDAI cautioned the Bank over the violation.
IRDAI further found that IndusInd Bank's website did not prominently display its corporate agent registration number as required. The website also lacked a clear disclosure informing visitors that IndusInd Bank, as a corporate agent, does not underwrite insurance risk or act as an insurer.
The regulator said such disclosure is important because customers need to understand the bank's role as an insurance intermediary and distinguish it from that of an insurer. The bank subsequently redesigned its website following the inspection observations. IRDAI nevertheless cautioned it for the lapses.
The fifth charge concerned discrepancies in the premium register, including instances where premiums appeared to have been remitted before receipt from customers, delays in remittance and incomplete or negative data relating to sum insured and premium dates.
IndusInd Bank explained that the inconsistencies resulted from the inclusion of cancellation, endorsement and long-term policy data in the data dump along with regular policy issuance data. IRDAI accepted the explanation and did not press the charge further.
Thus, of the five charges, IRDAI imposed the ₹1 crore penalty only for the grievance redressal violation. The first, third and fourth charges resulted in cautions and advisories, while the fifth charge was not pressed against IndusInd Bank.
